NZ: Small business productivity gains blocked by slow digitalisation

Wellington — 20 May 2025 — Xero, the global small business platform, today published a report with New Zealand Institute of Economic Research (NZIER) projecting the productivity gains Kiwi small and medium size enterprises (SMEs) stand to gain through accelerated digitalisation.

Productivity is the biggest long-run determinant of wages and living standards, according to the New Zealand Government¹.

The report notes New Zealand’s productivity levels have historically lagged behind other advanced economies (OECD 2022)² and points to digitalisation as a strategic opportunity for SMEs to overcome this issue.

The report cites research showing when SMEs invest in digital tools they see productivity returns ranging from $2.40 to $3.10 for every dollar spent, showing even modest digital upgrades can generate meaningful economic benefits³.

Based on inflation-adjusted modelling, this could result in a potential $8.6 billion boost to Aotearoa New Zealand’s GDP in 2025.

Digital adoption among New Zealand is uneven and fragmented. While many SMEs use basic digital tools like websites and email, fewer adopt advanced technologies such as cloud enterprise solutions, e-commerce platforms, or AI analytics (MBIE 2024)⁴.

Xero Country Manager for Aotearoa New Zealand, Bridget Snelling, says the report reveals Kiwi small businesses are falling behind the rest of the world, and swift action is required to remain competitive and improve productivity.

“Digitalisation is not just a competitive advantage for small businesses - it’s a necessity. Embracing digital tools like AI, cloud computing, and data analytics enhances innovation, can expand market reach and strengthens resilience in times of uncertainty,” says Snelling.

“Small business digitalisation helps break down barriers of distance and market size, unlocking local and global opportunities and enhancing efficiency in an increasingly competitive world.”

Global leaders

The report summarises what leading digitalised countries around the world have done to encourage digitalisation to boost SME productivity and their economies:

• Finland has a focus on SME digital integration, underpinned by a strategy focused on infrastructure, skills development, and targeted support. Initiatives such as Business Finland’s Innovation Vouchers and Tempo Funding offer SMEs grants of up to €50,000 for piloting digital projects, focusing on cloud computing, cybersecurity, and AI.
• The Netherlands emphasises financial incentives and sector-specific program such as Mijn Digitale Zaak (My Digital Business).
• Denmark integrates digitalisation with industrial strategies, offering financial and advisory support.
• Canada's ‘Canada Digital Adoption Program’ (CDAP) provides grants and loans for e-commerce and digital advice.
• Singapore uses structured guidance and financial incentives via program like SMEs Go Digital.
• South Korea's Digital New Deal invests in infrastructure, smart factories, and AI.

Snelling comments, “Looking at our international counterparts, we see how they’ve encouraged and supported their small businesses to innovate and digitalise. The challenge we face here must be overcome through collaboration between industry and government to deliver for Kiwi small businesses.”

NZIER Principal Economist Michael Bealing adds, "Digitalisation is not just about awareness - it requires sustained, practical support. For New Zealand, accelerating digital ambition will ensure small businesses lead, not follow, in the digital economy - unlocking productivity, innovation, and long-term prosperity.”

Improving productivity

Based on the report findings, Xero recommends the Government reform and formalise the Small Business Advisory Group (SBAG), including expanding its membership to include industry and academia to deep dive into digitalisation strategies for Kiwi small businesses to drive adoption and productivity.

Snelling concludes, “A useful precedent is the UK’s SME Digital Adoption Taskforce, a government–industry partnership that aims to identify barriers and co-design effective strategies to accelerate SME digitalisation and, in turn, boost national productivity.”

Read the Going digital in 2025 report

ENDS

¹ Treasury, Productivity, 2024

² OECD. 2022. ‘OECD Economic Surveys: New Zealand 2022’.

³ MYOB Boosting SME productivity and wellbeing report – Aotearoa New Zealand SME Digitisation White Paper

⁴ MBIE. 2024. ‘Business Digital Capability Monitor 2024’.

Media Contact

Xero Aotearoa New Zealand | Kristen Barrett | 022 064 2924 | kristen.barrett@xero.com

About Xero

Xero is a global small business platform that helps customers supercharge their business by bringing together the most important small business tools, including accounting, payroll and payments — on one platform. Xero’s powerful platform helps customers automate routine tasks, get timely insights, and connects them with their data, their apps, and their accountant or bookkeeper so they can focus on what really matters. Trusted by millions of small businesses and accountants and bookkeepers globally, Xero makes life better for people in small business, their advisors, and communities around the world. For further information, please visit xero.com.